NRB amends directive for microfinance companies: e-Banking prohibited; Criteria tightened for promoters margin lending

Nepal Rastra Bank has made a few amendments in the Directive for "D" class financial institutions, i.e. microfinance companies.

According to the amended directive, microfinance companies that have not established themselves at the national level cannot operate in multiple provinces. Only the microfinance companies that have established themselves at the national level can operate in more than one province given that they have the minimum paid-up capital requirement specified by NRB and also fulfill the paid-up capital bar set by the central bank.

If microfinance companies that have not established themselves at the national level are currently operating in multiple provinces, they'll either have to sell, abandon, or shift those branches by Ashad 2078.

Moreover, promoters of the "D" class financial institutions who wish to take margin loan against the shares that amount to more than 2% of the institution's shares mandatorily need NRB's approval from now. Furthermore, the particular microfinance company should verify that the promoter actually owns the shares specified while taking a margin loan.

Sadly, this amendment has prohibited microfinance companies from providing e-Banking facilities to their customers. Previously, they could do so under the central bank's approval.

Interestingly, the amended directive has further tightened the rule about the term of members of a management committee. Previously, a member of a management committee could not be a member of another management committee. Now, adding to this restriction, a member cannot even be in the same committee for more than one term.

Furthermore, if a microfinance company fails to maintain a minimum capital adequacy requirement at any time of a fiscal year, it cannot distribute a dividend for that fiscal year.